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Professional Negligence time-barred claim comes screeching to a Holt – Holt v Holley & Steer Solicitors

Aug 17, 2020, 13:34 PM
Divorce, Court Ruling, Settlement
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Limitation issues seem particularly rife in claims for professional negligence, and last week the Court of Appeal added to an already prestigious canon with judgment in the case of Holt v Holley & Steer Solicitors [2020] EWCA Civ 851.

The Claimant brought a claim in negligence against her former solicitors who had acted for her in divorce proceedings. She contended the Defendant firm had failed to obtain expert valuation evidence for certain of her assets that were to be considered in financial relief proceedings in the divorce. She said that her assets had been overvalued and as a result the District Judge had awarded her less in the division of matrimonial property than she would have obtained had she been able to adduce expert valuations.

The financial relief proceedings in the divorce had taken place through 2011 and early 2012, and the negligence claim was not brought against the Claimant’s former solicitors until 2018. Limitation was therefore in issue. Relevant was the following background:

  • There had been discussion of, and directions for, valuation and evidence concerning the parties’ assets at two interim hearings in July and October 2011.
  • The Defendant solicitors had sought the ex-husband’s representatives’ consent to have updated ‘drive by’ valuations of the Claimant’s real property introduced in evidence on 10 February 2012. Consent had been refused and no formal application had been made.
  • A final hearing in the financial relief proceedings took place over 4 days (2 x 2 days) between 16 February and 16 March 2012.
  • The District Judge in the case had circulated a draft judgment on 10 April 2012.
  • Judgment was formally handed down on 30 May 2012.

The present claim was brought on 28 March 2018, i.e. more than six years from the last day of the final hearing in the financial relief proceedings, but less than six years from when the draft judgment was circulated or formal judgment was handed down.

As is often the case in actions against former solicitors, the Claimant brought parallel claims in tort and contract. The Defendant applied for summary judgment on the basis that both causes of action were statute barred by virtue of sections 2 and 5 of the Limitation Act 1980. The District Judge at first instance dismissed the claim in contract  – a cause of action in contract accrues at the date of breach – but did not dismiss the claim in tort, as in the DJ’s view the date when the Claimant had suffered loss – a cause of action in tort accrues on the date damage is sustained – was when the judgment was formally handed down in May 2012.

On the Defendant’s appeal, the Circuit Judge considered that the latest possible date that quantifiable loss was incurred was 16 March 2012 and duly entered summary judgment. The Claimant then appealed to the Court of Appeal only in relation to the cause of action in tort. The sole issue was therefore what was the date on which the damage had been sustained. Was it not until judgment that the damage could properly be deemed ‘measurable/recoverable’, as the Claimant contended; or was it, as the Defendant argued, at an earlier moment when an error could no longer be corrected and the Claimant had realistically lost the opportunity to have her valuation evidence considered by the judge?

The Claimant/Appellant argued that the idiosyncrasies of financial relief proceedings in divorce meant that the failure to adduce the expert evidence in issue may have made no difference in the end depending on the judge’s solution to the division of the matrimonial assets: family judges had wide discretion in this type of litigation and their role was more inquisitorial than their arbitral counterparts in civil litigation; consequently the judge in that case could have come up with a solution where the Claimant suffered no loss. As such the Claimant’s loss was contingent upon the judgment and this meant it was a case in line with the well-known authority of Law Society v Sephton & others [2006] 2 AC 543, where the House of Lords had found that a contingent liability was not measurable damage until the contingency had occurred.

The difficulty for the Claimant, however, as was pointed out by the Defendant in oral submissions was that it was her pleaded case was that but for the Defendant’s negligence, the District Judge in the financial relief proceedings would have had the benefit of her expert valuations (for which figures were pleaded), and would have directed a balancing payment of some £76,000 more than he actually did – i.e. the loss followed inexorably from the failure to adduce the evidence. This meant that on her own Statement of Case, her losses were well measurable, if not precisely quantifiable, when she lost the opportunity to present these valuations. Unlike Sephton, this was therefore not a true contingency case.

In McCombe LJ’s judgment, even though a claim to division of assets in divorce was not precisely equivalent to a claim in tort, which is a ‘chose in action’ and therefore assignable, such a claim was nevertheless a right which sounded in money. As such a right, there were close analogies between this case and claims against solicitors in other areas of litigation which ought not to be artificially distinguished simply because the present right was not assignable; it nonetheless had value. The authorities in those cases demonstrate that a financially calculable right is damaged when it is rendered less valuable and although the value of a claim will fluctuate in estimation during the course of a case it is wrong to say that the claim has no value until judgment or settlement; its value can be damaged by negligent conduct at any point in the proceedings.

Following Berney v Saul [2013] EWCA Civ 640 and Khan v Falvey [2003] EWCA Civ 400 (both cases in the category identified), the question was whether there was a “real risk” that the claim had lost value and whether it had “entered that period” when “it was impossible to say that damage had not occurred”. In both cases the damage was measurable at an earlier stage than final disposal of the claim: in Khan damage was found to be sustained years before the cases had been struck out, because of the existence even at an early stage of an inevitability (or at least a very serious risk) that they would in due course be dismissed; in Berney damage had been sustained months before the claim was finally settled when there was a real risk that the value of the claimant’s claim would have been limited to £50,000.

Drawing parallels to the present case, McCombe LJ did not formally determine an exact date after which it was impossible to say that damage had not occurred (as on the facts there was no need). He hypothesised it could have been after the interim hearing in October 2011, or possibly in January 2012 when it became clear to the Defendant solicitors that they would not have the ex-husband’s consent to adduce the new valuation evidence. In any event, it could not be any later than 16 March 2012 and the last day of the hearing when the value of her rights vis-à-vis her ex-husband were diminished. Since the claim was not brought until 28 March 2018, it was statute barred by section 2 of the Limitation Act 1980.

The appeal against summary judgment was accordingly dismissed. 

To learn more about the author, Thomas Yarrow, click here

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